A balancing act: Shafeeq Abrahams, CFO of the NHBRC

As CFO for the National Homebuilders Registration Council (NHBRC), Shafeeq Abrahams has to juggle a lot of balls, and appease various stakeholders. Complicating matters, he says, is the fact that the entity has a public sector mandate: “The public sector mandate is about spending a budget against stated objectives. I think the psychology around budget allocation and spending is quite different where you’re a self-generating revenue entity and have to manage your sustainability and profits. And therefore, what you need to deliver has to happen in the confines of financial sustainability and efficiency. Being able to speak to these two sets of terminologies is a challenge because some of your stakeholders say, ‘You’ve got a budget, spend it’. But on the other end you have to look at operating profits, costs, operating effectiveness, and sustainability in the long run. In my role, I’ve had to shift thinking around these concepts.”

Tell us about your team. What is your personal style of leadership?
"The nature of the organisation is relatively small, there are about 25 of us in the department. It is a professional and competent team."
"For me, attracting and growing talent is critical, which makes brings coaching and mentoring to the fore. My style is one of operating as a colleague. I'm aware of my leadership responsibilities and accountabilities but I prefer to operate as a team leader rather than as a boss. This allows me to not only access the thinking and emotions of my colleagues, which ultimately contributes to a richer solution, but also to build strong and lasting relationships. There's a time for the formal side, but I believe the informal side is the most powerful in the leadership relationship."

"I'm also very involved in the strategic side. I have more of a strategic capability than a finance capability. This allows me to play a change leadership role within the organisation."

What are some of the challenges you face in your current industry as a CFO?
"The nature of the business is highly correlated to interest rate cycles. High rates mean banks don't lend easily, which means that home-owners and home-builder builders are not able to access finance easily, which translates into a revenue downturn for us. This necessitates lean cost structures and dynamic operating models. At the same time, we have an asset portfolio that needs to underwrite liabilities. The current market for volatility adds impetus to this dynamism. For us to navigate this volatility is important."
"At the same time, we also have a public sector mandate: we have to deliver services to the public; so one needs to balance and navigate between market dynamics, organisational responses, service delivery, stakeholder expectations and long term financial sustainability."

While in this role, you successfully took the organisation from an operating loss position to an operating profit position. Tell us about this.
"This was difficult to achieve because of the aforementioned public sector mindset. So we first had to deal with the leadership's thinking and attitude. We had to first do change management to shift this way of thinking, because we had to get leadership aligned. Part of my role was to manage this and do the turnaround on the financial side. The starting point for work was to understand the nature and quantum of the revenue drives, and what was driving the costs. We also put the insurance business under a microscope and started to understand its liabilities through actuarial modelling and valuations. Based on all of that analysis we said, 'Ok, what's controllable and what's not, and what course of action do we take?' Our first point of action was to control our operational costs. We needed to take much more effective decisions around resourcing and how we resource within the organisation, and introduced the concept of fixed and variable costs. Where we could maximise revenue we did. Then we put liabilities under the spotlight and tried to understand which variables were causing these to increase, and took better control of those variables. We also applied much more effective risk management. So, we started to understand what mitigation actions we could regulate to get the liabilities under control."

"On the asset side, we realigned the strategic assets allocation to be more in tune with the nature of liabilities. We then realised the timing of the liabilities was more long-term and could leverage the assets portfolio to take longer term periods in the market and improve the yields on the overall portfolio. We had to hard code that into the organisation's budgets and plans. This was a difficult sell - taking a financial strategy and pushing it into an operational strategy. We met a lot of resistance at some points."

"To be able to articulate the case and need for change and implement this into the operating budget was a critical imperative. But most importantly it was about providing the leadership, communicating what needed to change and having a disciplined follow-through on that change. It took about 12 months to start aligning some of these things. But if you really want to unlock it at the next level you need to start looking at the configuration of the operations. We realised you can only push the financial levers up to a point, then you start to get into the operations of the organisation and any further financial value can only be unlocked by reviewing how you run the operation. That's what led us to developing a turnaround strategy."

Tell us more about this turnaround strategy.
"Generally, public sector organisation need to raise their game in delivering quality, timely services to South African citizens. We also want to do this in a simple and cost-effective way. We've got a natural imperative to do this, but we want to unlock further efficiencies in the organisation while doing so. So, the turnaround strategy says let's review the configuration of our operations, starting with the operating model. It looks at the corporate strategy, its operating model and value chain, process optimisation, technology and infrastructure choices and deployment, and most importantly, skills sets. Given all these enablers as building blocks, the turnaround strategy aims to improve organisational performance that is centred around an effective leadership capability and a performance driven culture."

"Our key objective here is to build a modern, efficient technology-enabled organisation that can ultimately improve its product quality, service quality and turnaround times in a simple operating platform. We have those capabilities. We've got the tech, the people and the geographic footprint; it's about how we leverage them further and harness those resources more efficiently. I'm happy with the progress thus far. It should be complete by late this year."

In your previous role, you worked for Eskom. How does the energy space compare to the sector you're in now?
"The energy space is a much more complex environment. It is more capital-intensive and longer-term in nature. With Eskom, because of its size, your exposure to systems, people, complexity and capital management teaches you a lot. During my tenure, I worked on processes and systems as well as managed 450 people across 12 sites in South Africa."
"A key lesson I learnt was, in order to lead such an institution of this nature you've got to get the right people with the right skill who are supported with appropriate infrastructure and systems. Given the long lead times to bring projects online, long term planning, modelling and the ability to be decisive is crucial. Most importantly, you need to have above-average leadership capabilities, good composure and the ability to manage stress."

What is the toughest business decision you've ever had to make?
"Where there are issues of supply chain things can get difficult. Standing up to leadership and remaining principled and ethical around supply chain issues is never easy. One needs to be very outspoken, very principled in how decisions around supply chain are managed so that you get fair, transparent outcomes."

What do you most enjoy about the CFO role? What do you find most frustrating or challenging about it?
"I find the strategic role CFOs are able to play to be the most exciting. It's about creating value for stakeholders, and I find this very enjoyable. For CFOS to be able to move into that role you need to create a talent pipeline behind you. This is the challenging part. In building a finance team, the CFO must be cognisant of needing to create the depth of talent that lies behind him. So, for me to be able to do what I enjoy, I need to ensure I am also creating leaders and capable finance people behind myself, so I can focus on strategy while my staff take care of the functional responsibilities. So, things like coaching and mentoring talent, skills development; those are critical in the talent pipeline."

In your opinion, what does a modern CFO look like?
"I think there are three defining factors: strategic thought and leadership (creating value now and into the future); building a good reputation with trust and confidence (driving sound corporate governance behaviours, practices and reliable information); and driving operational efficiency and effectiveness. I feel that conceptualising strategy and designing a strategy is one capability of a CFO, but the execution and delivery thereof is the next most effective capability of a CFO; to be able to lead and execute the strategic change you envisioned."

"When I look at a CFO I expect a few things. A CFO must be able to lead the conversations that will shift the game from a strategic perspective. The CFO comes across a lot of data and analytics, and understanding this requires insight. So, the CFO is ideally positioned to understand the shortcomings of both strategy and operations. This includes both financial and non-financial information."

"In trying to process that information, one must understand the opportunities and the threats presented by the analysis and how to take advantage of the opportunities and mitigate the threats, among others."